Miami Marlins Bondholders Win as Fans Cry Swindle: Muni Credit

By Darrell Preston -
Nov 20, 2012

Baseball’s Miami Marlins won public support for a $515 million stadium by saying they couldn’t compete without it. Now, after the team capped its worst season in more than a decade by trading high-priced players, taxpayers on the hook for ballpark costs are angry.

“It looks like they just looted the city,” said Michael Cramer, director of the sports and media program at the University of Texas in Austin and former president of the Texas Rangers baseball team. “It doesn’t smell right, but as a business person looking at that team, I probably would have been real tempted to do the same thing.”

Taxpayer backing means investors in municipal bonds that Miami-Dade County and the city sold for the stadium that opened this year will get paid no matter how the team performs. The debt has gained along with the $3.7 trillion local-debt market this month even after the team logged the worst attendance for a new stadium’s first season in 11 years.

“It becomes a political problem when the taxpayers have invested all this money and then a team gets rid of its best players,” said Justin Land, who helps manage $3 billion of munis at Naples, Florida-based Wasmer Schroeder & Co. “The taxpayers still have to pay money to support the team.”

Trade Cleared

Baseball Commissioner Bud Selig cleared the trade yesterday, saying it represents “plausible baseball judgment.” He also said the Marlins owners had assured him they “are fully committed to build a long-term winning team that their fans can be proud of.”

P.J. Loyello, a team spokesman, didn’t respond to calls and an e-mail.

“We’ve finished in last place the past two years, and that is unacceptable to our fans, to us as an organization, and to me,” owner Jeffrey Loria said in a news release. “It’s incumbent on us to make the changes necessary to make us a winner again.”

In 2008 the team, city and county agreed to fund a $515 million stadium, according to city documents. Miami-Dade County financed its $347.5 million share with a $319.3 million muni issue in July 2009 and subsequent debt sales. Revenue such as taxes on stays at hotels and motels backs the borrowings.

Higher Rates

Stadium bonds carry higher interest rates than other debt backed by state and localities because ballfields aren’t deemed essential services such as water systems, said Daniel Solender, who helps manage $17 billion of munis at Lord Abbett & Co. in Jersey City.

Miami-Dade stadium bonds maturing in October 2028 traded Nov. 13 at an average yield of 3.01 percent, data compiled by Bloomberg show. Benchmark debt yielded 2.05 percent that day, amid a post-election rally spurred by bets that income taxes are set to rise.

The stadium bonds, which are insured by Assured Guaranty Ltd., have a AA- rating from Standard & Poor’s, the fourth-highest mark. The underlying credit is ranked one step lower.

Miami officials sold the public on the stadium bonds based on the team’s assertions that a new ballpark would boost revenue, helping it compete with wealthier rivals.

For the debut of the 37,000-seat stadium with a retractable roof, Loria and team President David Samson added Jose Reyes, the 2011 National League batting champion; pitcher Mark Buehrle, also an All-Star; and manager Ozzie Guillen, only to see the team finish last in the National League East with a 69-93 record, the worst in 13 years.

‘Bad Deal’

After firing Guillen in October, the Marlins traded top players, including Reyes and Buehrle, to the Toronto Blue Jays. In return, the team got relative unknowns and prospects.

“We’re stuck with a bad deal and a triple-A team,” said Alfred Spellman, a Miami-based filmmaker who produced “Cocaine Cowboys,” on the city’s 1980s drug culture, and “The U,” on the University of Miami football team. Spellman said in an interview that Marlins fans feel “swindled” by the team.

Miami-Dade Mayor Carlos Gimenez didn’t respond to a phone call.

The stadium deal contributed to the ouster of former Miami-Dade County Mayor Carlos Alvarez last year.

Mayor Move

The campaign to unseat the mayor was largely paid for by billionaire Miami businessman Norman Braman, a former owner of the National Football League’s Philadelphia Eagles. Braman’s complaints about Alvarez included using higher property taxes to fill a budget hole and spending taxpayer money on the stadium.

Braman declined to comment on the Marlins trade, though he issued a statement.

“Ask the elected politicians who voted to give Loria and Samson taxpayer dollars,” Braman said in the statement.

“Every time this team does something that is perceived to be motivated by profits, it’s an insult to the residents who invested a considerable amount of money in this facility,” said state Representative Carlos Lopez-Cantera, a Republican who won the Miami-Dade County property-appraiser election this year. He said he’s glad a bill he sponsored, calling for state money to support the stadium, failed in 2007.

The Marlins averaged 27,400 fans a game this year, 18th among 30 teams and more than 8,000 above 2011 levels. Yet the team needed 35,000 to 37,000 to sustain its business model, said Wayne McDonnell, associate professor of sports management at New York University.

From a business and baseball standpoint, it made sense to trade the players, said Cramer at the University of Texas.

“I would have stood up and said we made a mistake and we need to start over and build this the right way,” he said.

Following are pending sales:

MIAMI-DADE COUNTY plans to sell about $808 million in bonds as soon as this week that will be backed in part by revenue from Miami International Airport, according to data compiled by Bloomberg. The proceeds will refinance debt. (Updated Nov. 19)

NORTH CAROLINA MUNICIPAL POWER AGENCY Number 1 plans to issue about $616 million of debt as soon as next week, according to data compiled by Bloomberg. Proceeds will refund debt and finance capital improvements to a nuclear power plant, according to bond documents. (Added Nov. 20)